Court forces Missouri church to pay its attorney

There’s nothing less spiritual than a bill from a lawyer, except a judgment against the church in favor of a lawyer who sued a church for an unpaid fee.

Lawyers and courts are worldly by their very nature. While churches and courts want to do what is right, they have different standards for determining rightness. The Missouri Court of Appeal’s decision in Teasdale & Associates v. Richmond Heights Church of God in Christ demonstrates just how differently courts and a church reckoned Teasdale’s right to a fee.

Members of this church filed a petition in court in 2008, seeking an injunction to stop the pastor James Hunt from selling real estate owned by the church. Pastor Hunt and the church hired Teasdale to defend  Pastor Hunt and the church against the suit filed by the church members. The church was a corporation, having been incorporated under the Missouri Non-Profit Corporation Law, and Pastor Hunt was the church’s corporate president.

As president of the church and also as an individual, Pastor Hunt signed a contract with Teasdale & Associates, under which Teasdale was to be paid out of the proceeds of the church’s property that was to be sold.

A settlement was reached in the 2008 lawsuit, but Teasdale was never paid for his work in defending Pastor Hunt and the church from the parishioners’ lawsuit. So Teasdale sued the church. The church argued that Pastor Hunt was not authorized to sign the contract on behalf of the church, so Teasdale should look only to Pastor Hunt for compensation.

Without making written findings of fact, the trial court ruled for Teasdale. The lack of written  findings of fact in a collection case tried without a jury is common. When a case without written findings of fact is appealed, the appeals court will examine the evidence that supports the decision, giving the trial judge the benefit of the doubt on all issues of fact.

On appeal, the church claimed that there was insufficient evidence to support the court’s conclusion that Pastor Hunt was an authorized agent of the church. The church also claimed that Teasdale never made a demand for payment and that the amount of Teasdale’s attorney fees was unreasonable.

Was Pastor Hunt authorized to sign a contract for the church?

A corporation is not a human, but “an artificial being,” the court said, so that it could act only through its agents. As an officer of the corporation, the court said that Pastor Hunt could exercise the authority given to an officer by:

• Missouri corporation statutes,
• the church’s articles of incorporation and bylaws, or
• other “specific authority,” such as that given by corporate resolutions.

Teasdale introduced the church’s bylaws into evidence at trial, which stated that the president had the power to sign of contracts on behalf of the church for ordinary church business. Thus, Pastor Hunt as president had the power to bind the church to pay Teasdale, the court concluded, without elaborating on whether the litigation was ordinary.

Was a demand for payment necessary?

The court of appeals made short work of this issue, noting that under Missouri law relating to suits on account, the plaintiff is not obligated to produce evidence of a rejected demand. A “suit on account” is generally a suit to collect amounts due under a contract, such as a credit agreement. It the amount claimed is accurate and reasonable and within the terms of the agreement between the parties, the court will rule for the creditor.

When is an attorney fee reasonable?

People (and corporations) often resent the situations that forced them to hire attorneys, and this understandable resentment carries over into their evaluation of the attorneys’ charges. For a layperson–or a church–every aspect of the ridiculous situation that brought them to court seems painful and unreasonable.

However, Missouri courts have developed some rules for determining whether legal fees are reasonable–without concern for the ridiculous situation that brought the parties to court. The primary rule is that any trial judge is an expert on the reasonableness of legal fees, so that having an expert witness is not required. This rule seems self-serving for the legal profession, since the reasonableness of any other professional fee would require presenting evidence from an expert in the field. On the other hand, it’s easy to imagine that lawyers would be very generous (and possibly long-winded) if they were asked to testify about the reasonableness of the fees of their colleagues.

At trial, Teasdale submitted a fee agreement signed by Pastor Hunt for the church and detailed invoices. In the fee agreement, the church agreed to pay the fees at the hourly rates specified. The church’s agreement to pay fees at the specified rates is a good indication that the church’s authorized agent determined the rates to have been reasonable when the contract was signed.

What’s the lesson?

Actually, there are several.

The people who form and support churches and other non-profits sometimes suspend their good judgment when managing the business affairs of the organizations. The person whom they look to for spiritual guidance and pastoral leadership may be inexperienced with the business world or simply too deeply engaged in his or her main work to attend competently to management of assets and contracts. Dedicated volunteers who serve on church vestries and finance committees may occasionally place too much confidence in the church’s paid leaders.

I’ve seen deacons or boards of elders sign personal guarantees of a church’s building loan, then expect the bank to release them when they want to change churches. I have seen people make investments in opportunities presented by a fellow congregant, only to find that the fellow congregant worked church people because of the easy pickings. Churches are places to give, not to get rich.

I’ve known a pastor who founded a church which grew rapidly. The congregation paid for the construction of a large building on real estate owned by the pastor. Perhaps the pastor just forgot to convey the property to the church. When the congregation’s relationship with the pastor soured (and they often do), the congregation learned that getting rid of the pastor would be difficult, since he owned their building.  Church people with business experience need to manage a church’s property.

Churches sometimes acquire real estate and fail to make a claim for a property tax exemption. For various reasons–such real estate is often acquired by gift or through probate and the deed doesn’t get recorded–and the tax assessor doesn’t get the correct mailing address for the church. The property is sold for taxes.

Churches sometimes fail to incorporate and keep up their corporate status. As a result, they can lose the liability protections that they need.

Churches may need lawyers at least as much as lawyers may need churches. Even though the church has a spiritual leader, a good lawyer’s guidance in worldly matters can help keep a church out of trouble.